The Smart Export Guarantee - Will we get a Fair Price?

Image: Viridian Solar

Selling Green Electricity For A Quote-Unquote Fair Price 

People who know the solarblogger will tell you he's a bit of a swot.  Invited to participate in a panel discussion on the Smart Export Guarantee (SEG) at Solar and Storage Live 2019, he made sure to do his homework.  So it was that reading through the government's response to the SEG consultation, one thing kept leaping off the page.

The use of quotation marks to bracket the words "fair price" in the document.

And indeed the government's representative on the panel, William Marks from BEIS did exactly the same thing - that thing people do when they curl the first two fingers on each hand to imply quotation marks - whenever he uttered the words"fair price".

Before we get into the problem with setting a "fair price", let's recap the SEG.


The Smart Export Guarantee

By January 2020, all electricity suppliers with more than 150,000 domestic customers are required to offer at least one tariff that pays generators for exported electricity.

This applies to PV generators up to 5MWp capacity, also onshore wind up to 5MWp and anaerobic digestion, hydro-power and micro combined heat and power up to 50kWp.

Electricity suppliers with fewer than 150,000 domestic customers may choose to participate but are not required to do so.

The government has not set a value for the tariff, apart from it must be more than zero.  The tariff can be fixed or the price can float around, for example tracking dynamic wholesale prices.

Exported energy must be metered with a meter capable of reporting exports on a half hourly basis.
Generators already accessing the Feed in Tariff can join the SEG if they give up their deemed export payments under the FiT.

There will be no central register of SEG installations.

Suppliers must be satisfied that installations are safe, which in practice means they must be certified to MCS or equivalent.

A "Fair Price"

The government had proposed in the consultation that the electricity companies could set the price that they bought exported electricity at, subject only to the proviso that the tariff was always positive, i.e. higher than zero.

A number of respondents to the consultation, including the Solar Trade Association had raised concerns at the government's proposal to allow the electricity suppliers themselves to set the price that they wanted to pay for electricity exported by small generators (for example homeowners or businesses with PV solar).  They worried that the electricity suppliers would not set a fair price and called for a floor price.

In their response Government ignored these concerns and pressed on with letting the electricity suppliers decide the price.

And every reference to people asking for a "fair price" was put in quotation marks.

As if to say that these people didn't really get it.  Didn't understand what the grown-ups at BEIS did, that only markets can set a fair price.

The trouble with BEIS position here becomes immediately evident when you consider how a market arrives at a fair price:

A Fair Price is defined as the price for an item or asset agreed upon by a willing seller and a willing third party buyer, assuming both parties are knowledgeable and enter the transaction freely.

So, apparently unbeknownst to the big brains at BEIS we appear to be missing a pretty crucial element of the conditions required to arrive at a fair price by market mechanisms - a willing buyer that enters the transaction freely.  The very existence of the SEG proves that the electricity companies are NOT willing buyers -  they are being forced to enter into the transaction by regulation.  If they were willing buyers they would already be buying the electricity without the need for BEIS to intervene.

And why should they be willing buyers?  Every additional solar PV installation that the SEG helps incentivise is another house or office or factory needing to buy less electricity from the electricity suppliers for its own use.  Yes, each solar PV system represents an opportunity for the electricity suppliers to buy the excess generation, but the flip side is that they also sell these buildings less energy.  The electricity companies are completely conflicted.

From installing smart meters, to insulating people's homes and now the SEG, government never seems to learn.  It keeps coming up with ideas that require the energy companies to destroy demand for their product, and is surprised when the result is foot-dragging, delays and half-hearted, bare minimum efforts to comply.

In a fit of optimism, the Solar Trade Association created a web page to allow consumers to compare all the SEG offers that were being brought to market by these unwilling buyers of electricity.  As of today only one company - Octopus Energy has come forward with an SEG tariff.

I really wouldn't be surprised if  the big old dinosaur suppliers were to leave it right until the 11th hour and bring forward unappealing SEG offers priced at £0.001p (really - no mistake on the zeroes here).

Of course BEIS didn't need to pick a price themselves.  They could have looked for an analogous market where there are willing buyers - the half hourly settled wholesale market.  BEIS could have set a floor price based on this, or a period average of it.

Credit to Octopus for being first into the market with an attractive offer.  Clearly the rapidly-growing, so-called challenger energy suppliers are unencumbered by legacy systems and thinking and see an opportunity to attract valuable customers by requiring an SEG customer to also transfer their supply-side business.  The big six need to watch out, else they go the way of the dinosaurs and leave the energy market to these new, fast-moving mammals.

Solar Thermal in the Crosshairs

Bullet Point Needed for DECC Action Plan

The Department of Energy and Climate Change (DECC) has released its consultation on reforms to the Renewable Heat Incentive (RHI), and this time it looks like it’s the turn of solar thermal to be under threat.  DECC's intention is to completely remove support for solar thermal by dropping it from the RHI while support for other renewable heat technologies such as heat pumps and wood chip boilers continues under the scheme.

As the solarblogger shows below, it's relatively straightforward to pick holes in the government's arguments for singling out solar thermal.  Whether DECC will be swayed from what is looking more and more like an ideological attack on solar is more open to question.

Busting The Arguments

DECC says:
Solar Thermal technologies account for 17% of total accreditations (7,445 out of a total of 45,111) but just 2% of heat (11TWh out of 598TWh).

Solarblogger says:
Solar thermal delivered 2% of all heat (11TWWh out of 598TWh), but accounts for only 1.4% of committed budget at the end of 2015 (£0.69m out of £49.3m).

So what?  So what if each solar thermal system contributes a small amount of energy?  It’s being unfairly compared to massive biomass boilers heating country piles, factories, and barns!  We already knew that solar thermal was more likely to be applied to domestic hot water in normal family homes where the small amount of energy each installation delivers still represents a significant proportion of household energy consumption (around 10%).

If affordability is the basis on which solar thermal is to be excluded from the RHI, then surely the relevant statistic isn’t to compare the proportion of all installations against the proportion of total heat, it’s to compare the cost against the heat delivered.  On this basis solar thermal looks much better value for money.


UPDATE (4.4.16) - figures should be treated with caution.  The committed budget is forward-looking and the delivered heat is backwards-looking, so it seems likely that large numbers of biomass boilers installed in the current year will be increasing committed budget but not contributing greatly to historic delivered heat.  Research into OFGEM figures by Mike Landy at the STA suggest that solar thermal represents 2.8% of payments made under RHI for 2% of delivered heat.



DECC says:
When asked, around half of all owner-occupier applicants said they would have installed it anyway.

Solarblogger says:
The DECC survey asked people to report their motivations for doing something after the event.  Such surveys are prone to a well-documented error called social desirability bias.  This is a tendency of respondents to answer questions in a way that paints them in a good light.

What DECC fails to mention is that the proportion of owner-occupier applicants saying that they would have installed other RHI technologies anyway was also extremely high.

Proportion of respondents saying they would have installed the same technology irrespective of the availability of the RHI:

Biomass         11%
ASHP 31%
GSHP 32%
Solar Thermal 49%

Installing renewable energy systems is seen as doing a social good.  People are less likely to admit that they only did it because of a government bribe.  The less expensive the system they have installed, the more ‘embarassing’ it would be to admit you wouldn’t have done it without the RHI.

The survey is flawed and to rely on it as a reason to take such a significant action against solar thermal is shocking.

DECC says:
We judge solar thermal to be a mature technology with a well-established global supply chain.  It is not clear that ongoing RHI support will serve to build this supply chain in the way that it can for other less mature technologies in the UK like heat pumps.

Solarblogger says:
Again solar thermal is being unfairly singled out.  A well-developed global supply chain for solar thermal is being compared with an immature domestic (UK) supply chain for heat pumps.

Heat pumps also have a well-established global supply chain, due to their high deployment in other European countries (27 million in operation across EU) according to Eurobserver and 1.7million heat pumps were sold in the EU in 2014.

Just like for heat pumps, solar thermal has a strong global supply chain but a nascent UK supply chain.  Just like for heat pumps, action to stimulate a strong UK supply chain has the prospect of reducing costs in the UK.  The Solar Trade Association estimates by as much as a 30% reduction in costs for a volume UK market of 200,000 systems a year.

Past Performance is not an Indicator of Future Success

DECC argues that deployment rates for solar thermal are too low to justify keeping solar thermal in the RHI, and that they can’t increase the subsidy levels as they are already set at the so-called ‘Value for money’ cap agreed with Treasury.

If the folks from DECC had been able to find an unconflicted solar thermal company to talk to (one that didn’t also make a living from PV), and asked them what was the one thing it could do to grow the market for solar thermal, the answer would have been “Reduce the subsidy for PV”.

The Feed in Tariff had four years’ head-start on the domestic RHI and domestic solar PV launched with tariff levels four times higher than the cap imposed on solar thermal.  Until the most recent shock reduction in the Feed in Tariff, support for PV was still higher than the cap (taking into account that the domestic RHI is for seven years, and the FIT is for 20).

Add in the loophole that pays owners of solar PV systems for exported electricity, even when they divert that power to heat water instead of exporting it and it’s obvious that the real reason for solar thermal underperformance is more linked to decisions made in the department at DECC that looks after the Feed in Tariff.

The Feed in Tariff has now been cut to a level that gives a much more level playing field with solar thermal, and many installers were starting to re-boot their solar thermal expertise and explore this option.  A recent survey of member companies by the Solar Trade Association found level of enquiry for solar thermal running at double the rate of the previous year.

The tragic mistake that the Heat team at DECC might be about to make is to have reached their conclusions about the performance of solar thermal based on a period during which a separate department at DECC was supporting PV much more generously.

Fixes Needed in RHI

Linking the domestic RHI to the Green Deal was a mistake, and the cost of having to get a Green Deal Assessment affected solar thermal disproportionately compared to more expensive technologies.  The decision to remove this requirement would boost solar thermal.

Solar thermal is an excellent companion to heat pumps, taking the strain on high temperature domestic hot water and allowing the heat pump to focus on working at lower temperatures, where its performance is more optimal.  The domestic RHI tried to reward people that installed both technologies together by allowing them to claim support for domestic hot water for both heat pump and solar.  Unfortunately the regulations were drafted in a way that ruled out the most popular implementation of a combined heat pump/solar system – a thermal store, see my earlier blog on this cock up here.  The Solar Trade Association has proposed a number of different ways that DECC could have fixed this problem to boost solar thermal deployment, suggestions that were sadly, ignored.

The proposal to remove solar thermal from the RHI is based on flawed logic.  The market has changed drastically since funding for PV was cut and early signs since then show indications of a return to growth.  Domestic hot water is the heat load that cannot be insulated away and solar thermal has an important part to play in decarbonisation our homes and addressing fuel poverty.

DECC should continue to support solar thermal and fix problems with the RHI that are holding it back rather than throwing it out of the RHI.

Self-Consumption of Solar PV Generated Electricity

The Amount Customers can use Themselves now Matters More than Ever

When the UK Feed in Tariff (FIT) launched, people investing in solar were paid the equivalent of 48p/kWh in today’s money for solar energy they generated (irrespective of whether they used it themselves or exported to the grid).  With electricity savings worth around 15p/kWh and export paid at 4.8p/kWh in today’s money the only number that really mattered was how much energy you would generate with your solar panels. Fortunately, solar professionals have accurate tools to forecast the annual yield for a solar, even relatively simplistic approaches such as the MCS calculation get pretty close.

As solar costs have fallen since the start of the FIT, the generation tariff has fallen too.  Now the generation tariff is worth about a quarter of the starting value - 12.47p.  If the government presses ahead with its reckless cutbacks on the FIT, then the generation tariff would be only 1.63p for domestic customers.

As these changes have occurred, the economic basis for installation of solar panels has become more and more driven by the value of the energy savings the system produces.  With the generation tariff at only 1.63p, the energy savings dominate (see the graph below).

Most solar companies have been using a value of 50% to estimate the amount of energy generated by the solar that would be used in the property (and therefore offset energy bills), so called self-consumption.  The justification for doing so is that this is a ‘government figure’ because the amount the FIT pays for export has to be deemed rather than metered, and government set the value of export at 50%.  So logic says that if the export is 50%, then the self-consumption must be 50% too, right?

Wrong.

Just because the government says it is willing to pay the export tariff on 50% of the energy generated, this is not the same as saying that all houses will use 50%, irrespective of the size of the array and energy consumption patterns of the house during the day.

In the past, errors in the estimate of self-consumption have not really mattered to the presentation of the economics.  Right now they are starting to matter.  As the generation tariff is reduced further, they will really matter.

The industry is going to have to develop ways to more accurately assess and predict self-consumption.

So let’s start by having a look at a few examples of real homes with solar.  Thanks to RBeeSolar and 4Eco for allowing me access to anonymised data on their systems.

Each graph shows a full 24 hour period running from midnight to midnight, with mid-day in the centre.  The day is divided into 10 minute sections and the energy flows are shown in watt-hours per 10 minutes.


Blue is electricity pulled from the grid for consumption in the house.  Orange is energy consumed in the house and provided by the solar panels.  Yellow is energy that cannot be used in the house and that is therefore exported to the grid for others to use.  The electricity consumption of the house is the sum of the blue and the orange.

House One

House 1 has relatively low total annualised energy use 2,250 kWh per year.  This figure represents about three quarters of the electricity use of a typical UK home (often taken to be 3,100kWh/year).    The use pattern shows a small morning peak and a larger evening peak.  There is little use above the baseload during the daytime on week-days, but additional electricity use at weekends, indicating a household where occupants are out during the working week.

Data was only available for July, August and September for this house, but the self-consumption rate during this period was only 22%, with 78% of generated energy exported.  The solar system is not especially large at 2.5kWp.


House 1 Self Consumption: 22%

House 2

By contrast, house 2 shows a consistent pattern of electricity use during the working week and weekend, indicating a household that is occupied during daylight hours all week.    The base load is a little higher than for house 1, and there are regular peaks of electricity consumption throughout the day.  

The pattern of electricity use is similar in winter, perhaps with a higher evening consumption.  The graphs clearly illustrate how on a gloomy winter day (Thursday), most of the solar is used in the house, but that there are still sunny days in winter and plenty of export going on. 

Total electricity consumption over the year was 2664kWh, so still a little lower than typical (86%).  The solar system on this house is 4kWp.


House 2 Self Consumption: 24%

House 3

House three has an annual electricity demand of 5,030kWh, comfortably higher than the typical UK house.  It also has a use pattern that indicates people are at home during the working week. When coupled with a  4kWp solar system, this results in a higher self-consumption level, but still only 37%.

House 3 Self Consumption: 37%

Conclusions

The withdrawal of Feed in Tariffs (whether sudden or gradual) is the clear direction of travel.  The result of this trend is that self-consumption of solar electricity becomes the dominant economic justification for installing solar PV.  Any error in the predicted level of self-consumption will have a larger impact on the overall financial returns than has previously been the case.

Based on the small sample considered above, the industry-standard use of a value of 50% for self-consumption of solar generated electricity in domestic installations looks generous.  With increasing availability of monitoring equipment householders will be able to check the accuracy of figures that were used in the sales process. 

Products that divert excess solar electricity to water heating may have a role to play in increasing self-consumption, but the economic savings will depend on the replaced energy that would have been used to heat the water.  The government’s announced intention to retrospectively pay only metered export once smart meters are installed means that if the house has gas-heating, the value of the gas use avoided is similar to the income from exporting the electricity. 

Diversion of excess solar electricity to charge electric vehicles or to battery systems that can store energy for evening use will become more possible as the price point of these technologies continues to fall.  In the meantime it could be that the economic optimum moves away from the current goal of maximising subsidy yield (aiming for 4kWp or as much as will fit) and we begin to offer slightly smaller solar PV systems that produce less excess on sunny days and a higher proportion of self-consumption. 

This maturing market could involve the solar installer fitting monitoring equipment in the house for a short period before making a recommendation about a right-sized solar installation.  From my experience of looking through data on these houses and others, the good news is that people appear to be real creatures of habit.  One or two weeks' worth of monitoring should be enough to give a good indication of the timing of people's energy use.


The industry needs to do more work to understand the relationship between the proportion of self-consumption and the size of the solar installation relative to the size of the annual electricity demand.  It may be that predictive tools, or at least rules of thumb can be developed to allow solar installers to size the solar system to achieve a level of self-consumption knowing the annual energy use of the household.

The Dogs are Already Running

The Absurdities of the Feed in Tariff Review

The solarblogger has met  a number of officials from the Department of Energy and Climate Change (DECC) over the years and holds them in very high regard.  Make no mistake, these are smart people we’re dealing with.

Which makes the recent Feed in Tariff (FIT) review all the more perplexing.

Government is proposing to place a cap on the cost of any future deployment of solar under the FIT.  If events over the course of the consultation period indicate that this cap will be breached, government proposes to close the generation tariff to new entrants.

But at the same time it has created the perfect conditions for a ‘gold rush’ by announcing that the tariff payments will be cut by up to 87% infour months time. (January 2016)

A kind of self-fulfilling prophecy has been formed.

It doesn’t matter if industry provides evidence to support less draconian cuts to the proposed levels of the tariffs.  The cap has been set at such a low level that even a modest spike in solar installations during the consultation will ensure it is all spent.

They say the definition of madness is to repeat the same actions again and again and expect different results.  Well, back in 2011, DECC did almost exactly the same thing.  It announced a 50% stepped reduction in the FIT.  Installation rates exploded.  Within six weeks the industry was installing solar at a rate nearly 16 times higher than in the run up to the announcement.

The same thing has already started.   The dogs are already running.  And this time there’s four months for people to get their installations registered on the Feed in Tariff and claim the current payment levels.  Naturally, this is what the press has focused on, with headlines stressing that people need to get in now if they want to make money from solar panels.

If we rule out stupidity, and assume that the big brains at DECC are able learn from past experience, then there’s only one conclusion to draw.  DECC deliberately set things up for a gold rush, thereby creating an excuse to close the scheme entirely (or at least the generation tariff part, the export tariff appears to be slated to continue).

The most dismal part of this whole sorry episode is that under the guise of ‘controlling energy bills for hard working families’ the government has manufactured  conditions to ensure that the costs of the Feed in Tariff will be higher than ever, the country will get less solar installed, but at a far, far higher cost to those hard working families.

There was an alternative.  The Solar Trade Association, published  its Solar Independence Plan in the run up to the FIT review.  Clearly no-one at DECC read it.  It proposed a glide path to zero subsidy over the next four years by reducing the level of FIT payments to new entrants little and often.  This would have avoided the inevitable spike in installations that will now occur.  Because more of the installations would have occurred in the future (at low levels of Feed in Tariff) it would have ensured that the country got more for its money.

Government should act quickly to prevent the boom and bust and protect consumers from the higher energy bills this ill-considered proposal will inevitably produce.  The solar industry should demand the immediate withdrawal the consultation.  DECC should try again.


This article also appeared on the Solar Power Portal:
http://www.solarpowerportal.co.uk/guest_blog/the_dogs_are_already_running_3425

Is RHI More Trouble than it’s Worth?

To get support from the domestic Renewable Heat Incentive (RHI), there are some hoops it’s necessary to go through, but how much do these add to the cost of a solar thermal installation?

If you install a solar thermal system in the UK you can receive financial help from the government’s Domestic Renewable Heat Incentive (RHI).  RHI payments vary depending on factors such as the size of the solar panels, their location and orientation and especially the hot water demand of the house (which is taken from the number of people who live there).  It can be worth between £1,500 and £3,500, paid out over the first seven years.  In addition to the payments householders also benefit from savings on energy bills, the value of which are much higher the RHI payments over the long life of the solar heating system.

In order to qualify for the RHI, the solar panels must be of a certain quality - achieving accreditation with the Microgeneration Certification Scheme (MCS) or SolarKeymark, the installation company must also be MCS accredited and the household needs to demonstrate that it has taken straightforward energy efficiency measures such as insulating the loft and filling cavity walls (where there are cavity walls to fill).  The way that this last requirement is proven is to produce a Green Deal Advice Report that doesn’t show loft insulation or cavity wall insulation as a recommended measure.

In recent weeks it has come to light that some solar installation companies are advising customers that there’s so much cost and bureaucracy associated with installing a solar thermal system that qualifies for the domestic RHI that they are better off avoiding the scheme.

Let’s have a look at whether this argument stacks up.

Extra Costs for the Installation

Let’s assume that the installation is of identical quality both with and without the RHI.  The installer cuts no corners on the installation standard and that the equipment that is used is registered with the MCS or Solarkeymark.

The installer must log the installation onto the online MCS database for the customer to be able to claim the RHI. There is a charge from MCS of £15 to do this.  Let’s add £20 to that to pay for the time for someone to fill out the online forms.  Total £35

In addition, the household needs to pay a Green Deal Assessor to visit and produce the Green Deal report.  You don’t need to undertake any of the recommended measures unless they include loft insulation or cavity wall insulation.  The report costs between £150 and £250. 

So the total Variable Costs (cost per installation) are between £185 and £285

Annual Costs for the Installer

For an installer to be MCS accredited, there are annual fees to pay and administrative time required.  Let’s take a look at the costs for a smaller company, as it is generally thought that the burden is highest for these.

The solar installer must pay a fee to join the scheme and be audited each year.  For a solar installer with less than 10 employees the MCS annual registration and audit fee comes in at around £470 (see NAPIT fee sheet). 

In addition there is an MCS requirement that the solar installation company must be a member of an approved renewable energy consumer protection code.  Joining RECC depends on the number of staff, but for 1-6 employees it’s £250/year. 

Let’s assume the company wouldn’t operate a formal quality system if it wasn’t going to be MCS accredited and add £1,000 of admin time to these figures to pay an office administrator to maintain the paperwork that the scheme requires each year and make sure the document handover packs and quotes remain compliant with the scheme.

Both the fees and overhead costs fall (per technology) if the company installs other MCS renewable energy technologies as well as solar thermal, but let’s assume it doesn’t.

For this small company then, the total annual Fixed Costs of maintaining an MCS solar installer registration is £1,720.   

Total Cost

The total additional cost per installation of being RHI compliant is found by dividing the Fixed Cost by the number of installations the company does each year and adding this to the Variable Cost per installation.

This is where the costs of accreditation can start to look very high – it depends enormously on how many installations the installer does each year.  See the table below.

How the admin costs of an RHI compliant solar system varies with the number of installations
the installation company does each year

If the installer does only one or two solar installations a year then, yes the costs of RHI compliance is high compared to the benefit in claiming the RHI, but even at only one system a month the extra costs start to become really quite small compared to the RHI payments. 

The more installations that the company can do each year, the more the costs trends down towards the cost of the Green Deal Report.   Nor will every customer see this as a valueless piece of paper; some may value the guidance on further measures they could take to improve their energy efficiency.

The problem for the RHI is that until the scheme starts to drive demand for a reasonable number of installations, then for small companies that perhaps combine general plumbing with a very occasional solar installation the barrier costs of being MCS registered don’t look worthwhile. 

An excellent time to encourage a customer to consider solar heating is at the same time that a hot water cylinder is being replaced, but the plumbing company standing in front of the customer won’t offer this option if it isn’t MCS registered  If they do offer solar they might encourage the customer to ignore the RHI.  This is, of course, a classic chicken/egg situation.  Unless this plumbing company starts to offer more customers solar under the RHI, they’ll never see enough demand to justify MCS accreditation.

It would be good if there was a way to encourage this plumber to promote solar thermal to customers, perhaps in cooperation with a local accredited solar installer.  For any installation company that’s doing more than a handful of solar thermal installations each year, the cost of the RHI requirements are small relative to the RHI payments.

However this is not to say that MCS couldn’t do something to reduce the burden on smaller installers to meet the ever-increasing demands of the scheme.

May Cause Side Effects

Solar Anti-dumping's Unforeseen Consequences

The ineffective fudge that came too late for solar module manufacturers is now poised to kill off the European inverter manufacturing industry

As predicted by many, the antidumping measures on Chinese solar modules brought in by the European Union have proved rather too easily circumnavigated.  I've heard of a number of approaches to evasion since the minimum price agreement was reached, but the most recent I've heard about should have Brussels Eurocrats in a cold sweat.

A Flag of Convenience?

I guess the most obvious sign of AD avoidance is the flood of Malaysian solar panels that are now prevalent at the low end of the market.  Many, including myself, strongly suspect that there's far more Malaysian modules being sold than there is manufacturing capacity in Malaysia. The obvious conclusion is that product is being trans-shipped from China via Malaysia and arrives in Europe with  paperwork to prove it's not of Chinese origin.

Some companies try harder than others to maintain the pretence that they have a factory in Malaysia. One company that approached us has gone to the trouble of making a Malaysian website (suspiciously similar to a Chinese manufacturer's and with all the same photos). It was only when we asked to visit the Malaysian factory that we were told that it wasn't company policy to allow visits, and that it was a 'quiet time' anyway so there wasn't anything to see.

Others are less circumspect about what they're doing. Take a look at this email I received offering to illegally rebadge Chinese modules as Malaysian with "all paperwork":

 

Dear value customer,

Nice to meet you!

Yes, for said product, here we would like to provide the professional trading solution to avoid the high anti-dumping duty that imports from China.

The routine for the containers will be as:

CHINA ---> MALAYSIA(change the containers in the free zone or inland warehouse) ----> England

Document issued details:
a. Malaysia solar panels factory CO
b. Master bill of loading under Malaysia factory
c. Malaysia factory packing list
d. Malaysia factory invoice

And the cost is much favor, it will save a lot of the anti- dumping tax:
1. Ocean freight from China port to Port Klang (west): to be advised
2. All in fee in Malaysia:
a. Include all the local fee for changing containers in Malaysia;
b. Include the above Malaysia factory document fee;
3. Ocean freight from Port Klang to England: to be advised

If you are intrested in such trading solution, kindly pls feel free to contact us anytime.
We have many successful cases to England for this item and other items.

Tks a lot.

Marketing Support

Another ruse is for the Chinese supplier to charge you the full minimum price and then separately remit money back to you against an invoice for "Marketing Support" or "Consultancy". The first invoice less the marketing support is the true price for the modules, but the only paperwork customs and excise sees is the first invoice at the minimum price.

My company has been approached with this offer on numerous occasions.

While this clearly isn't in line with the spirit of the AD legislation, I'm also not sure whether it would be strictly illegal.  After all, what's wrong with a manufacturer offering to part fund marketing initiatives in an export market?  Perhaps we'll see a test case soon?  Then again, perhaps we won't. Having brought in the rules, we've seen little evidence that the Commission has the stomach for the hard graft of enforcement.

Inverter Cross-Subsidy

I only heard about this approach recently, but if it becomes widespread it has the potential to wreak havoc upon European inverter manufacturers.

The way it works is that a Chinese module manufacturer agrees a price below the price undertaking level with you.  It then invoices you at the price  undertaking level and transfers the difference as a payment to an inverter manufacturer up the road. This payment is obviously invisible to EU customs, which only sees the modules being bought at the right price. The inverter manufacturer then sells you a shipment of inverters at a knock-down price (but not too low to be suspicious), with the price subsidised by the 'overpayment' for the modules.

The Antidumping decision came too late for the many, many European manufacturers of modules already in liquidation after years of fierce competition from Chinese competitors, but at least the continent still has world leading inverter manufacturers.

But for how long under the current regime?  SMA is already laying off staff and issuing profit warnings to investors blaming a lessening demand for solar in Europe.   How ironic if the policy intended to protect European solar manufacturing ends up contributing to the destruction of its manufacturers of solar inverters and Chinese dominance of this product segment in addition to solar modules.

The commission should either crack on with enforcing their price undertaking agreement with gusto, or should put the whole thing out of its misery and let Europeans benefit from world pricing on PV modules.  The current situation helps no one.

The Domestic RHI and Solar Thermal Stores

The Law of Unintended Consequences Strikes Again

The domestic RHI was structured with the intent that the complementary combination of solar thermal with other heating technologies would be actively encouraged by receiving double subsidy for the domestic hot water energy.  Unfortunately, the wording of the legislation has prevented installers using the simplest way to implement a combined system (the thermal store) because it rules out solar systems that can make even a theoretical contribution to space heating.

Thermal Stores in Hot Water

Solar thermal systems can make a contribution to space heating as well as domestic hot water (DHW) preparation, especially in spring and autumn where the days are still bright and there is a demand for space heating.  These systems are not yet as common in the UK as those for domestic hot water, but in more developed European markets such as Germany and Austria, so-called "solar combi systems" are popular.

In a thermal store the domestic hot water is heated in a heat exchanger
and the contents of the store pumped around the space heating circuit

A good way to combine solar thermal with space heating is to use a thermal store, essentially a large (typically 500 litre minimum to 1,000 litre) hot water cylinder with heat inputs from both solar and the backup heating system and with outputs to domestic hot water and space heating.  Typically the body of water in the thermal store is heating system fluid (primary water) and domestic hot water is heated on-demand in a heat exchanger as it flows to the hot tap.

Both heat pumps and biomass heaters operate well when running continuously rather than cycling on and off, so charging a thermal store is a good technical solution that improves the overall efficiency of the heat pump or biomass boiler.

Where the designer is seeking for the solar to make a reasonable contribution to the space heating, the solar panel array installed is large (around 12-18 m² for a domestic property).   The coverage of domestic hot water of such systems can be very high, 70% and above.

Where the designer is aiming for solar to mainly cover domestic hot water the panel array is smaller (typically in the range of 3  - 6 m²).  In this case there is still a theoretical possibility that the solar energy will contribute to the space heating, though in practice the system is sized with the aim of supplying 60-70% of water heating.

The current domestic RHI legislation completely excludes systems that can contribute towards space heating.  

The text in the RHI regulations defines an eligible solar system as follows:

a)     is designed and installed to provide heating solely to a single eligible property and solely for an eligible purpose using liquid as a medium for delivering that heat;

(b) meets the requirements set out in whichever of the standards for solar thermal plants specified in paragraph 1(5)(a) and (b)“eligible purpose” means, in relation to heat generated by— […](b) a solar thermal plant, the purpose of domestic hot water heating for an eligible property;

An implementation of solar where there is even a theoretical possibility of the solar contributing towards space heating is completely excluded from the scheme.

The reasoning behind ruling out solar space heating was that the domestic RHI is “deemed” – the solar energy is not measured, instead it is estimated using an approved calculation and the calculation only works for domestic hot water.

However, by ruling out any solar installation that does not solely heat domestic hot water, the domestic RHI has made the combination of complementary renewable heating technologies such as solar and heat pumps less likely. Solar thermal has lower associated carbon emissions than any form of back up heater, so every unit of solar thermal heat that can be used, whether for space heating or domestic hot water reduces carbon emissions.

Configurations where the solar is offsetting a proportion of fossil fuel space heating are also disincentivised by their complete exclusion from the domestic RHI.

When installing biomass or heat pumps with a thermal store, the additional cost to add a solar coil into the store is very low, making the marginal cost of adding solar thermal more attractive.  The domestic RHI would provide greater value for money if it encouraged, rather than discouraged such systems.

So how could the domestic RHI be changed to include solar space heating?

Two Suggestions

Two options occur, though I’d be pleased to hear of any other suggestions (please use the comments section).

First, it would clearly be possible to use a heat meter to measure the solar input into the thermal store.  Solar space heating systems cost more than solar systems aimed only at domestic hot water.  A requirement to fit a heat meter would be a relatively smaller proportion of the total installed cost and energy benefits, and houses that can fit large thermal stores are relatively thin on the ground, so it wouldn’t be too much of a cost for the scheme administrators to deal with the meter readings.

A second approach would be to allow space heating systems onto the scheme but to give RHI payments only for the domestic hot water energy provided, and calculate this with the current deeming method.  I’ve looked at this with the help of two years'  of data from a solar space heating system provided by Geoff Miller of GreenLincs Energy.  Simulations have also confirmed that the solar energy generated by a system providing solar space heating and domestic hot water is always higher than the same sized system targeted at only domestic hot water.  The RHI wouldn't be over-paying for solar heat.

The best outcome would be for it to be the choice of the homeowner whether or not to go to the expense and hassle of having a heat meter.  If they wanted the extra payments for space heating, then they would need to install a heat meter, otherwise they could claim for only the solar heat in their domestic hot water.

This has formed the basis of a proposal submitted to the Department of Energy and Climate Change (DECC) yesterday outlining how the scheme could be improved by allowing solar space heating.

Replace or Refurbish?

What to do with older solar heating systems 

It could be so much better



I've been getting correspondence from solar installation businesses asking what the domestic RHI might mean for older solar systems, specifically ones that were never entered onto the Microgeneration Certification Scheme (MCS) when installed.  Is there any way for these to claim the Domestic Renewable Heat Incentive (RHI)?

Can you just inspect that the solar heating system is compliant with the current MCS scheme, re-commission it and register it as if you've just installed it?

Do you have to rip it out and put in a whole new one?  Would even this be allowed on the scheme?

Setting aside the fact that the intent of the dRHI was to stimulate new installations of renewable heating, and that finding a way to register an existing (and potentially working) system is not really in the spirit of things, let's have a look at the regulations and see what they have to say about it. 

MCS

A review of the MCS standards (MIS3001 and MCS 004) finds that they are silent on whether the equipment used when installing a solar system must be brand new to be registered with the scheme. The implication is therefore that an installer could go through the standard line by line to ensure that the existing installation is compliant, making changes to components as required and registering the system on the MCS database.  In effect the installer is building a system from ‘second hand’ parts, some of which happen to already be on site and fixed in place.

However, just getting MCS registered does not mean you can get the domestic RHI.  It's also necessary to comply with the eligibility requirements of the RHI scheme itself.

Domestic RHI

The domestic RHI legislation has now been laid in parliament, so it’s possible to see the basis that OFGEM will be using to create the scheme rules.

The relevant section of the domestic RHI regulations is on page 12 in section 9:

Plants used to generate heat before the first commissioning date9.—(1) The requirements referred to in regulation 3(b) are that no part of the plant which generates heat, other than any of the components listed in paragraph (2), was used before the plant’s first commissioning date.(2) The components referred to in paragraph (1) are—(a) immersion heaters and other components which solely generate heat for the purpose of heating domestic hot water;(b) supplementary electric heaters; and(c) circulation pumps.

From the above it seems that so long as the heat generating part of the installation is new, then other parts of the heating system can be re-used.  This makes sense – it would be crazy to insist that a new biomass boiler installation also had to replace all of the connecting pipes, radiators and hot water cylinder in the home.

In relation to a solar thermal system, the parts of the plant that can generate heat are:

1. Solar Collector
2. Pump
3. Immersion heater in cylinder

Items 2 and 3 are specifically excluded in the regulations.  It seems to me that to modify an existing solar thermal installation so that it is eligible to join the domestic RHI scheme, it is necessary to change the solar panels, but that all other components could be re-used.

Have I missed something?